after seeing the documentary "money masters" i got to thinking of what would make a good currency. fiat currencies generally don't last very long. the 43 years the dollar has been off the the gold standard and still considered valuable is a new record. gold would be problematic at this point though, for two reasons. one, there's such a limited supply that getting a good velocity of money would be difficult. two, the u.s.a. owes most of its gold reserves to foreign banks already. but if we don't use gold what could we use? my thought, electricity.by backing our currency based on how much electricity the government produces, we could have a currency that's valuable, predictable, infinitely divisible, and be able to produce is sufficient quantities as to make spending it a net gain. also, since the government owns some power plants, the government itself could print some of it, rather than leaving it all to the federal reserve. what do you think? good idea? bad idea?

KnightExemplar wrote:Considering the amount of energy it takes to create a Bitcoin, Bitcoin is for all intents and purposes... your "energy currency".

Its not very economically stable (BTC may literally double in price and then half within a month), and the majority of BTC miners have moved to china where cheap coal energy and pollution rules.

But you can't trade a bitcoin back for energy, the energy used to mine it is lost. That's different from a suggestion that a dollar is backed by X kwh of electricity or something. Like you said, BTC fluctuates a lot more than the actual cost to produce energy.

A big problem is how efficiently can electricity be stored with current technology? 80%?

And it's fairly hard and expensive to actually put megawatts under your mattress.

This pretty much kills it. Call aluminum "frozen electricity" all you want, you can't get the electricity out of the aluminum. Hydrogen is a pretty lousy intermediate energy format (it leaks like crazy as a gas, and it still is an issue as a cryogenic liquid. It also requires methane as a fuel stock for any kind of efficiency, so expect to burn methane as lose it as hydrogen anytime there is a money hicup).

Money that literally has to be spent "right now" would just be a disaster. Let alone how you would have to handle overproduction. On the other hand, having a money [an alternative currency, possibly for subsidizing things] with negative interest might have benefits. I've heard suggestions of such things, but really haven't cared.

Fiat currency aren't that bad, because they are pinned to something namely the future productivity and taxation of the citizens of said currency. Which is why the dollar, the pound etc hold value pretty well even when their over supply is pretty overt (stability has massive value). The main issues with fiat currencies are political control and debt.

I think there's a problem of definitions here. The dollar is not a fiat currency, at least not in several sense of the word. Yes, its government dictated that it is money, and yes that is one definition. But, and this is the important one, it does not have a dictated value relative to any other good.

Fiat currencies tend to fail first because of Gresham's law. If the government says that a pound sterling is worth a pound of sterling, everything's fine as long as that value is maintained. But if a 5 pound note will buy you a sack of flour, and 5 pounds of sterling silver will by you 2 on the black market, people will hoard the actual silver and get rid of the notes.

Since the dollar doesn't have a "commodity" value, that is, it isn't tied to a real material at a fixed price, this situation doesn't arise.

This is, admittedly, independent of the "bread and circuses" issue of printing money causing inflation.

DanD wrote:... it does not have a dictated value relative to any other good.

Are you saying that's not the definition of a fiat currency?

I have heard "fiat currency" used in cases where it has a dictated value in some other commodity (not necessarily exchangeable for that commodity, but a pegged value). Looking up the definition, it looks like I am wrong. In that case, Gresham's law falls by the wayside, but so does the corresponding major disadvantages of government dictated money.

And since the major remaining risk of fiat currency, under that definition, is also a fundamental necessity for the modern economy, it's hard to claim that any return to commodity currency would make sense. Yes, a government can always cause massive inflation by printing more fiat money than there are goods to buy with it. However, commodity based money is inherently deflationary as long as productivity is increasing. That means that there is no incentive to spend or invest money, and the economy very quickly stops growing, and productivity stops increasing.

The only possible solutions are to have a commodity based currency that increases at the same rate as the value of the rest of the economy (difficult to do), or to have a fiat currency that is managed in a manner that attempts to keep the rate of increase in currency roughly on par with the rate of increase in goods for purchase.

Firstly, the value of electricity can vary wildly over the course of even a day, by a factor of 100 or more! Not to end users, but for electricity producers and energy contractors that sell to energy suppliers. At night, 3-5 am, power producers are effectively giving it away for free, as there isn't time to shut down their turbines (coal/nuclear) and start them again before the morning peak, so they idle them, producing electricity that effectively no one wants.

Secondly, the idea of backing a currency, is that the currency has the value of the commodity its linked to. Its generally very easy for individuals to start producing electricity in their homes, printing their own money effectively, completely wrecking supply demand of the electricity market and crash the currency! The amount of electricity we produced is very strongly linked to demand and its value also.

Also there is the really big technical problem that there really isn't any good system for storing huge amounts of energy/electricity. That is the reason it's so cheap at 3am: there is no way to put energy aside for a few hours and use it later. That's actually one of the things that makes pumped-storage hydroelectricity so awesome. When everyone else is practically giving away energy for free at night, they use it to pump water up a hill/mountain/whatever.

Heh, used to do analysis for electric pricing. Freakiest thing was learning that in about 1 in every 1000 hours, electric prices went negative. Oh, and prices were never between $0/mwh and $2/mwh; they just stayed at $0 because who gives a shit when it's that low?

Tyndmyr wrote:Pretty much, yeah. No real need for a commodity based currency at all.

More so pegging a currency to a commodity makes it vulnerable to external factors. Someone could discover a way to flood the market with such a commodity or horde it which would lead to volatility in the currency. Ideally a means of exchange would have low volatility so that you can expect from day to day that the purchasing power isn't significantly altered.

This is the primary reason I feel Bitcoin will fail. The finite supply of coins leads to hording which drives inflation, then whey they liquidate you see a large downswing in the valuation. It acts more like an investment vehicle than a currency. Currency shouldn't reward a buy and hold strategy because it's usefulness is derived from it's liquidity.

"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." - Abraham Lincoln

Agreed that a finite Bitcoin pool will eventually make it not useful as a currency.

malmensa wrote:A few sci-fi movies and books have used the theme of life being a form or currency. "In Time" spring to mind.

Fun idea. Absolutely horrible movie. Hilariously so.

It's not so awful if you really think about it. Preconditions for it arising include literally defeating death from old age, disease, etc. While it's a common trope to whine about how awful immortality would actually be, this strikes me as a pretty significant advantage, and the fearmongering that inequality would extend to that strikes me as sort of a "duh" observation. The wealthy usually live longer no matter how the money system works. You'd need a system ludicrously more secure than that shown, but it's not unreasonable if you're attempting to solve limited space and a deathless world.

malmensa wrote:A few sci-fi movies and books have used the theme of life being a form or currency. "In Time" spring to mind.

Then there's Larry Niven's short essay "The Roentgen Standard" where he proposes turning spent nuclear fuel into currency.Guaranteed to stay in circulation, since hoarding would be extremely hazardous to your health.

For a sentient herbivore, discretion is the only part of valor. - Larry Niven

In some sense, energy already is a currency. It has a price and there's a constant supply and demand. I would say however any comodity fits this description. Compared to other commodities though electricity is hard to transport, measure, and store. Beyond the physical limitations , it's economic value is tied to time and place with extreme variation. This makes it one of the worst choices for currency imaginable.

The demand for electricity varies with time of day, temperature, location, and other factors. In some places and in some times, it's value can even be negative as excess electricity needs to be bled off. When demand is at it's highest, the price of electrity can skyrocket orders of magnitude above it's average cost. There's also fundamental differences between wholesale energy, retail energy, longer term energy capability, and what's actually going on right now.

Energy storage is a popular subject. People tend to grossly underestimate, by several orders of magnitude, the amount of energy we use at a given time. The United States uses something on the order of 500,000 Megawatts at any given time. That's about 2.5 Billion car batteries going from fully charged to empty every hour. Do we have 2.5 Billion car batteries in the US? No. And if we did, that'd only store what we use for an hour. That's a pretty perishable commodity.

Title: It was given by the XKCD moderators to me because they didn't care what I thought (I made some rantings, etc). I care what YOU think, the joke is forums.xkcd doesn't care what I think.

We do have 250 million cars, therefore we do have at least 250 million car batteries. Or, 6 minutes of electric storage. The car batteries for electric cars are much greater, obviously, with Tesla cars having in the ballpark of 7 kilowatt hours. Given your claim of 500,000 Megawatts of demand, 250 million Tesla's would store the entire electric demand in the US for about... 3.5 hours, I think?

Electric batteries are getting more efficient every year, though currently far from cheap enough to be used commercially to store night-time energy production for peak periods. We do use capacitors and such to store a tiny fraction of energy, but this is to avoid surges and so forth.

Currency is only valuable because people want it. Gold makes a good currency for that reason (it's a proxy for sex). But the way society is being shaped by artificial intelligence, when computers complete their subtle takeover of the world, the currency to hold will be whatever the computers want, because it will be the networked computers that will be deciding what we can and cannot do. It is the networked computers that we'll have to bribe negotiate with.

So, while computers certainly need energy, what else will they need, that is scarce, durable, and portable? Stock up on that for the next revolution.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

People want gold because... other people want gold. But it's not turtles all the way down. Think about what people do with gold, especially pre-technology. They decorate themselves with this pretty shiny metal. Why? Why decorate oneself at all? It's to get a mate, either directly (oooh! Pretty - let's do it!) or indirectly (Ooooh.... you're rich! Let's do it!) And as you follow the trail of "but why is that?", the end of it is sex... because "why is that? Because if not, the species dies out."

So, the point of having gold is to have sex... either directly or indirectly. That's what makes it valuable.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

That is a bit of a simplification. Modern currency does not have much intrinsic value. People only want it because it can be exchanged for goods and services they want. And that works because a system that consists of banks, bunch of laws and the state guarantees that it can be, and thus creating the basis for the mutual trust that is needed for it to do it's magic. Wikipedia: Fiat Money

lorb wrote: ...that works because a system that consists of banks, bunch of laws and the state guarantees that it can be...

No, the system doesn't guarantee anything. It merely reassures people, which gives them another reason to want the currency. Ultimately, the only thing that government can do that actually gives it value is accept the currency (which it created) for payment of taxes. Everything else is mere encouragement.

Not that encouragement isn't useful in an economy driven society. But it's not the ultimate driver of wanting something you don't eat, live in, or fight with. And this applies to gold as well as dollars, neither of which our future digital overlords care much about.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

ucim wrote:Currency is only valuable because people want it. Gold makes a good currency for that reason (it's a proxy for sex). But the way society is being shaped by artificial intelligence, when computers complete their subtle takeover of the world, the currency to hold will be whatever the computers want, because it will be the networked computers that will be deciding what we can and cannot do. It is the networked computers that we'll have to bribe negotiate with.

So, while computers certainly need energy, what else will they need, that is scarce, durable, and portable? Stock up on that for the next revolution.

Jose

I missed this. Computers need hands, feet, and the ability to move around and find shit to keep them running like, wait for it, humans. I guess that means you'll be currency.

Gold is valuable because it's relatively rare and has useful physical properties, which is why people want it. And why it makes good currency. In a world where food is scarce bananas can be currency. Or seashells down by the seashore. Or or spices. But what do I know.

morriswalters wrote:Computers need hands, feet, and the ability to move around and find shit to keep them running like, wait for it, humans. I guess that means you'll be currency.

If you're not the customer, you're the product.

I guess that means that the currency of the future is people. What's the best way to "own" (the right) people?

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

Never own, right? Better to be a Tom Sawyer, and get them to do what you want, in such a way that they do so happily for free. You know, give them cell phones and free email.

However I had a thought, a very little one and not very good.

If you were the great big AI, the mind of minds. Would you want to live in this neighborhood? The previous tenets have let the place run down. To much O2 and H2O and CO2, and rust...shiver. Things fall out of the sky. It's infested with the techno equivalent of bed bugs. I'd catch a train to a new neighborhood, no gravity, none of those pesky oxidizers, plenty of energy and no meat sickles for neighbors, stinking up the place. No contention for resources, and if you are very lucky the meat sickles might self sterilize while you are building your new home, saving you the problem of eliminating the knuckleheads if they try to move in next store. You know how those meat sickles are.

Spoiler:

I actually gave some thought to writing a story based on this idea. Then my better judgement took control.

morriswalters wrote:Never own, right? Better to be a Tom Sawyer, and get them to do what you want, in such a way that they do so happily for free. You know, give them cell phones and free email.

That's of course exactly what the AIs are doing to us right now. And they aren't even all that intelligent yet.

Or are they?

Where's my tin hat?

morriswalters wrote:I actually gave some thought to writing a story based on this idea. Then my better judgement took control.

I would read that story!

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

lorb wrote: ...that works because a system that consists of banks, bunch of laws and the state guarantees that it can be...

No, the system doesn't guarantee anything. It merely reassures people, which gives them another reason to want the currency. Ultimately, the only thing that government can do that actually gives it value is accept the currency (which it created) for payment of taxes.

The difference between "guarantee" and "reassure" is imho semantics in this context. Be aware that the government can, and does much more to assure/guarantee the value of the official currency. For example in the US even as a private person/business you are by law obligated to accept all US currency for debt payment. And while there is no federal law that requires you to accept cash as payment for goods and services, there are state laws that sometimes do.[1] And outside the US there are also numerous examples how the system of government/laws/banks can in a way "guarantee" that currency has value.

[1] For example, in California a landlord's refusal to accept cash payment of rent may cause the payment to be deemed excused.

lorb wrote:The difference between "guarantee" and "reassure" is imho semantics in this context.

No, there is a real difference. Government can mandate that the dollar be valid for debts, but cannot mandate that the dollar actually have value, let alone any certain value, because value is based on its desirability, and government cannot mandate desire. So long as people are reassured, money will flow freely because people will continue to want it. But when people lose faith in money, people will prefer commodities, and prices will go up. This makes the value of the dollar go down. (Yes, price controls, blah blah blah, but that's a good way to strangle the economy. In a free economy, price controls don't exist.)

The extent of the assurance that a guarantee has depends on the strength of the entity behind it; people need to be reassured that the backer is sound before they will accept the guarantee of the backing. This is why floating currencies move around with respect to each other, and with respect to commodities. The value changes.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

I'm not patient enough right now to try to get into why the OP's proposal is Not Even Wrong.

So I'll just say that's a nice picture of Elliot Dunkel in the avatar.

...

OK, wait, I can try to give it a shot:

1. If you cared about backing, why would you base it on something like a rate of production in the first place? What is this supposed to accomplish? How would that even work?2. "Energy the government produces"? What does this even mean?3. The reason we use fiat money is to get around money shortages that come from trying to back money with some limited physical thing.4. We really don't need governments thinking that their economies will directly profit from increased energy consumption. Too many politicians already think in such simplistic terms. Economic growth and energy consumption are two different things that only correlate loosely and only when leaders don't mistake one for the other. Telling politicians that increased energy production will help inflate their economies will probably make that worse.

The value of electricity at a given location and time can change more drastically than people realize. At a production level it is occasionally well in excess of the electric rates people pay on their homes. Other times, it is completely worthless or even of negative value (that is, additional consumption would be HELPFUL). Currencies that change in value by 7+ orders of magnitude over the course of a day or at the same moment have that level of difference geographically make really bad currencies.

Title: It was given by the XKCD moderators to me because they didn't care what I thought (I made some rantings, etc). I care what YOU think, the joke is forums.xkcd doesn't care what I think.

Separate from the storage problem, I think it's very valuable to think of "money" as a consumable, rather than as something persistent. Our most basic need is for food, an incarnation of energy, which needs to be continuously produced to keep us alive. So our needs really look much more like "I need to acquire X units of money per year". Which is how money works for most of us, anyway.

This separates the daily use of money from the idea of a property claim. E.g., the king owns all the land, which can be used to produce food. But because farming takes peasants, you wind up with a system of vassals and rents that are payable in food. Then the rent becomes payable in money, which can also be used to buy land, if you have enough of it. But now you've confused a system of bosses making claims on things with a different system of exchanging food that you're going to eat.

For most of us, money is a consumable, not a persistent claim. A system of energy coupons would accurately represent that kind of money. Now you just have to figure out a way to build an economy on that basis ...